Three Things to Keep in Mind With the Federal Student Loan Pause Extension

Stacks of cash beneath a graduation cap.

Earlier this month, the Department of Education announced that federally-held student loan payments will continue to be paused through August 31, 2022.

This extension provides welcome relief to student loan borrowers who are still finding their footing in an economy recovering from the pandemic. Here is what the CFPB’s research, supervision, and enforcement work shows about the risks student loan borrowers might face.

Many borrowers are at risk of struggling when payments return

The CFPB released a research report suggesting that millions of student loan borrowers are at risk of financial hardship. Notably, the report shows that, while pandemic-driven policy interventions like automatic forbearances eased delinquencies during much of the pandemic, delinquency rates on non-student-loan debts have been increasing for nearly a year. As pandemic-driven relief expired, delinquencies rose. As of February 2022, non-student-loan delinquencies are roughly even with where they were in February 2020.

This figure presages potential financial turmoil for federal student loan borrowers when their loans go back into repayment. The February 2022 data show a continued rise in non-student-loan delinquencies even while the pause on student loan payments is still in effect—meaning that borrowers need not contend with loan payments that can amount to hundreds of dollars per month. Once those payments again come due, borrowers who are already increasingly experiencing hardship will face additional financial strain.

Too many borrowers could face bills for unnecessarily high amounts

For years, CFPB work has shown that student loan servicers have erected barriers to borrowers’ access to lower payments under income-driven repayment plans and loan forgiveness under income-driven repayment and Public Service Loan Forgiveness (PSLF). Earlier this month, the CFPB announced an enforcement action against EdFinancial for making false statements to borrowers dissuading them from seeking forgiveness under PSLF. This action follows findings in Bureau examinations that multiple servicers have made false statements to borrowers about their options to seek lower payments or forgiveness on their student loans. The costs of these servicing breakdowns can add up to thousands of dollars in loan balances that borrowers should be able to have forgiven through income-driven repayment or PSLF. As we look ahead to the resumption of payments, it is vital that borrowers are able to access these existing programs that provide lower payments and cancellation.

Millions of borrowers are also navigating servicing transfers

From the end of 2021 through the present, millions of borrowers have seen their loans transfer from one servicer to another—and the transfers will continue through 2022. Whether in student loans, mortgages , or other forms of credit, transfers of loans from one servicer to another can give rise to errors. The CFPB will continue to monitor the activities of student loan servicers as they conduct transfers and begin communicating with student loan borrowers. As repayment draws closer, student loan borrowers can confirm who their servicer is using the Department of Education’s website .

Consumers can help hold servicers accountable. If you are having an issue with a student loan servicer, you can submit a complaint to the CFPB online or by calling (855) 411-2372. Complaints help us spot patterns and hold companies accountable in CFPB enforcement and compliance work.

Written by Andrea Matthews, CFPB.